The unfortunate situation a family may face when an earning person suddenly expires . In such tragic situation , one more problem is of tax compliance for income of the deceased person. As per the law , it is generally the duty of legal heir to comply with filing of tax return related to income earned by the deceased family member before his death and certain income which may be earned after the event of death. Then , there may be cases that the property of the deceased could not be partitioned among heirs and the income from such a property is still being earned .
Are there specific provisions for dealing with the income of a deceased person?
Yes, the Income Tax Act provides two express provisions under Section 159 and Section 168 for assessing a deceased person’s income. One is about legal representative and another is Executor of a estate of a deceased person.
What is the difference between a Legal Representative & Executor to file the tax return of a deceased person?
Confusion is created because both these terms are often used interchangeably. Section 159 of the Income Tax Act refers to a legal representative in whose hand the assessing officer will assess the deceased person’s income.
Section 168 of the Income Tax Act says that the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor,—. A judge appoints an executor to oversee a person’s estate after death. That includes administering their possessions and property. Often, this legal person, the Executor, is named in a will of the deceased person, and the Judge of the jurisdictional court formally makes his/her appointment.
Who should file the return of income of the deceased person?
Income Tax Department just want that the income of the deceased be recorded in the tax return and that tax return should be legally authenticated by the Legal Representative or the Executor as the case may.
In the case of a deceased person, the income generally has to be categorized into two periods: income earned when they were alive and the second after their death.
Situation 1: Income earned up to the date of death
It should be assessed by legal representative(s) as per section 159 of the I T Act. Therefore, in such cases, a legal representative should file the return of the deceased person.
For example, let us say a person who was earning a salary of Rs 10 lacs dies in April 2022, then the return of income for the FY 2022-23 (Asst. Yr 2023-24) should be filed by his legal representatives as per section 159 of the I T Act.
Situation 2: Property not divided among legal heirs , and no executor is appointed.
If the court appoints a will and Executor, the Executor shall file the return if the deceased has left a will and appointed an executor. In this case, provision u/s 168 of the I T Act is applicable.
Suppose no executor is appointed, the deceased has not left a Will, or there is no division of the deceased person’s property as per court, and the court appoints no Executor or Administrator; then, in that case, the legal representative should file a return of income.
Who is a Legal Representatives of the Deceased Person?
The term “Legal Representative” is defined u/s 2(29) of the I T Act as having the same meaning as is assigned to it in clause (11) of section 2 of the Code of Civil Procedure 1908, which states:
“means a person who in law represents the estate of a deceased person, and includes any person who inter meddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued;”
In practical terms, the legal heir himself, if there is only one or if there is more than one heir, should make a written (or verbal ) agreement with other heirs, assigning one person as legal representative for income tax matters. That person can sign the return of the deceased person and can appear before the assessing officer in case of any proceedings.
Who is liable to pay tax on the income of a deceased person?
The income and assets will pay the tax liability on the income of deceased person. The assessment and recovery will be done through Legal Representative or the Executor as If sections 159(4),161 and 167 of the Income Tax Act which provides that :
- Legal representatives are liable to pay tax to the extent of their liability.
- As per section 167, if one legal representative pays on behalf of other heirs, he/she has the legal right to recover such amount from other heirs. For this, he can even deduct the amount from the share of another heir on whose behalf he had paid the tax.
- Similarly, the Executor is also responsible for paying taxes. Still, he also has the right to recover the tax from the person on whose behalf he, as Executor, is paying tax.(Refer to sections 169 & 162).
How to eFile Return as Legal Heir?
The department has eased the process of filing tax returns of a deceased person by the legal heir. The process is simple! You must apply online for approval to file a tax return for a deceased person. Here are steps:
- Visit incometax.gov.in and log into the portal with your credentials.
- You will see many menus on the top bar. Click on the Authorized Partners menu and then Register as Representative Assessee.
- A new window for Registration as a Representative Assessee Opens. There, you need to click a button titled Create New Request.
- After that, Select the Category of assessee to whom you want to represent.
- Select the category of assessee as Deceased (legal heir), enter the deceased’s mandatory details (PAN, DOB etc.) and upload the mandatory attachments.
- You will also have to fill in the names and PANs of another legal heir.
- You must select “Filing of Return of Deceased” as a cause.
- Lastly, you need to attach documents like.”
- PAN of a deceased person
- Death certificate
- Copy of Legal Heir proof (Many documents can be proof of legal heir. If you are a nominee in any bank account, visit your bank and request the manager to issue a certificate that you are the nominee. This is sufficient proof of being a legal heir to file tax return}
- Lastly, submit and verify the submission for which OTP will come on your mobile.
If everything is okay, the department will inform you about the acceptance or rejection of your request to be a legal representative of the deceased.
After that, when you log into the portal, you will have two options at the time of login -your account or your legal representative account.